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#Post 20 : WHY FACEBOOK INVESTED IN JIO?

With its $ 5.7 billion investment, Facebook is now Reliance Jio’s largest minority shareholder. This was accompanied by a pact between WhatsApp and Reliance Retail to boost the latter’s JioMart platform. 

However, Facebook has been spreading its roots in digital media market by making heavy investments like, 

  • The social media giant bought Instagram for $1 billion in 2012,  
  • WhatsApp for $19 billion in 2014,  
  • and virtual reality firm Oculus VR the same year for another $2 billion.  


In all three instances, the common denominators were obvious. The deals all gave Facebook majority of ownership, and brought in technology that the world’s largest social network either didn’t have, or saw as prime bolt-on acquisitions. Now its latest investment is of almost $5.7 billion in Reliance’s Jio — for just 10 per cent stake. India is among the largest communities globally for the company, with close to 328 million users. Instagram has millions of accounts in India, and Whats App has about 400 million users in the country, making it the biggest market outside the US.  

Not lagging, Jio recently announced that it had the largest subscriber base with around 400 million users.The bigger picture is that, with everything going on in China which, in any case, is closed to Facebook, and the growing reluctance to engage with businesses there, India would then be the largest “user base in the world that has not been fully harvested”. 


 

But Facebook may stand to gain a little more from this deal.

Mukesh Ambani is a prominent voice in India and many conclude that it shares close ties with the ruling government. If true, this could help the company leave a bigger mark in India.

For Facebook, it means access to over 400 million Jio subscribers, a partnership with one of India’s largest tech companies with a play in telecom services and infrastructure, cloud storage (JioCloud), digital entertainment (JioTV and Jio Cinema), payments (MyJio), communication (JioChat), cybersecurity (JioSecurity), ecommerce (JioMart), health tech (JioHealth-Hub) and IoT (JioMotive for smart car connectivity), and the opportunity to launch new products (e.g., Lasso) through Jio’s vast reach.

 

According to Ambani, “In the very near future, JioMart and WhatsApp will empower nearly three crore small Indian kirana shops to digitally transact with every customer in their neighbourhood. This means all of you can order and get faster delivery of day-to-day items from nearby local shops. At the same time, small kiranas can grow their businesses and create new employment opportunities,”



This is called a ‘phygital commerce’ strategy, where your local kirana store is on WhatsApp and you send him a message to order your groceries.This appears to be the first major project that Facebook and Jio will work on.  


WILL IT SUCCEED? Nevertheless, its something that should give pause to rivals like Amazon. The focus of the tie-up will be to create new ways for people and businesses to operate more effectively in the growing digital economy. 



By Sneha Paranjpe

 


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